The investment approach of a generalist VCT

David Hughes, Chief Investment Officer of Foresight, managers of the Foresight VCTs.

View a list of Foresight VCTs

When we launched Foresight VCT (Foresight Technology VCT as then was) in 1997, we had a single-minded objective:  to create value for our shareholders. In the intervening 17 years, the World has seen dramatic changes - two global downturns, following the “dotcom” bubble and more recently following the global credit crunch. And in that time Foresight VCT has also changed. Having broadened its remit from a pure technology focus at launch to a generalist VCT now, it invests in growth companies across a wide range of sectors and all across the UK. Recent deals have varied from an aerospace engineering business in Dundee and media services company in Manchester, to an air conditioning and refrigeration specialist based in Kent and guitar amplification and accessory business headquartered in Northampton but exporting worldwide.

Growth companies are currently experiencing relatively benign economic conditions - the UK economy is performing strongly against its European peers and interest rates are at an unprecedented low level and are likely to remain so for some time. We are even starting to see appetite for bank lending to SMEs returning, albeit slowly, in part stimulated by the Government’s “funding for lending” scheme.

Track record

Although past performance is never a guarantee of future performance, it is nevertheless worth noting that Foresight VCT has created its fair share of value since launch, having returned more than £35 million of dividends to investors and achieving a total return of £2.30 per £1 invested at launch. Although certain commentators understandably point to some outstanding early exits as the principal cause for this outperformance, what is often overlooked is just how strongly the VCT has performed in recent years. The Board recently announced the payment of a 6p dividend following the successful refinancing of one of the portfolio companies. The policy of the Board remains to return cash to investors, targeting an annual 5p per share dividend.

Creative capital

At this point in the business cycle, we have seen notable growth in the volume of deal opportunities, with a current annual run rate of over 500 opportunities per annum. We’ll only invest in the top 1-2% of these opportunities, in those demonstrating real value and growth potential, being managed by creative, entrepreneurial and visionary leaders. We continue to invest in companies that create jobs, create growth and above all will continue to create value for all our shareholders. We call it creative capital.